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SNXweave Weekly Recap 3

SNXweave Weekly Recap 3

August 27, 2021

The following post contains a recap of news, projects, and important updates from the Spartan Council and core contributors this week, as well as some performance highlights of those involved in governance. The presentations of SIPs 120 and 169 are also discussed, as well as upcoming election coverage from SNXweave.

Present at the August 24, 2021 Spartan Council Weekly Project Sync and SIP Presentations:

Spartan Council: Bojan, Brian, Danijel, Jackson, Kain, Michael, Spreek, Synthaman
Core Contributors: Afif, Alex, Daniel, Darius, David, Jordan, Justin, Mike, Rafa

Last week we discussed SIP-173, the Synth Upgrader Contract, which was to be rejected in favor of SIP-174: the proposal for redeeming deprecated synths that was presented last week. SIP-173 was officially rejected this week, and SIP-174 was voted on and approved with six votes in favor from Bojan, Spreek, Michael, Brian, Jackson, and Danijel, and none against. This SIP is now in the process of being implemented.

Once SIP-174 is live, SIP-158 to deprecate inverse synths, SIP-166 to remove sCEX, iCEX, and add sCEFI, and SCCP-124 to rebalance and rename sCEX to sCEFI will all be executed.

SIP-175 to fund maintenance for the protocolDAO was officially rejected after last week’s presentation, and Justin will be revising it once the treasury council is created. SIP-155 to deprecate the sDAO however, which was also presented last week, has been opened for voting.

Synthetic Futures are also progressing well, as Jackson is working on this SIP with Anton, Clem, and Liam. They’ve got an internal alpha up and are working on simplifying the mechanism to get it up on Kovan OVM for testing within the next 1–2 weeks.

The LINK Wrappr SIP has also passed through its testing stage and is now going through some final contract refactoring before sending it to audit. Jackson is also writing the specs for the debt shares SIP that we discussed in our first blog post, and he is currently working out the mechanics of the calculations. As a refresher, this SIP will serve as a way of distributing collateral from positions flagged for liquidation to SNX stakers by having them take on the debt rather than liquidating their collateral. This will be crucial in helping unify the L1 and L2 debt pools.

Last week we also discussed SIP-120, the Atomic Exchange Function SIP that was formerly known as the TWAP Exchange Function. Due to changes made after its approval, it was moved back into feasibility and presented again by Brett this week. Since it was first presented, Uniswap V3 was released, so a few questions have been raised that caused three major changes to the SIP:

  • The first change was switching the DEX-based Oracle over to Uniswap V3. Brett explained that this change is critical, as it simplifies the entire smart contract interaction. He explained that previously, Uniswap V2 had a TWAP mechanism in it, but that made it harder to keep the price up-to-date. You would often have to pay bots or run a bot yourself to continuously checkpoint various pools on V2 to get the time weighted average price. Whereas now on V3, it’s built into every pool natively.
  • The second change was the addition of Uniswap spot pricing. Initially, only the TWAP from the V3 pools was used, but since then, Kaleb has determined that it is safe to use “spot” in addition to TWAP. The reported DEX-based price of a synth will therefore be an aggregation of Uniswap V3’s latest price, “spot”, and a TWAP based on a configurable window, and then compared against the current Chainlink rate.
  • The last major change to the SIP was the addition of a proxy for volatility. This serves as a way to further decrease the risk to the debt pool during periods of clear market directionality. A volatility circuit breaker will therefore automatically disable and re-enable atomic exchanges for a given synth based on its perceived volatility. This circuit breaker uses the number of Chainlink updates over a certain period of time as a proxy for volatility; if there are more updates than the configured threshold, the synth is deemed too volatile. Brett said that there will need to be a bit of trial and error to find the right volatility threshold that correlates well without clogging the mechanism. Voting for this SIP is now in progress.

The other SIP that was presented this week was SIP-169, proposed by Jordan to deprecate low volume L1 synths. We discussed this SIP briefly last week, as its motivation is to prevent exploitation of low volume synths by deprecating them on L1 and better solving these front running and manipulation risks on L2. The idea is that this allows for a chance to reevaluate the synths that will be launched on L2, as we start to roll more out and get comfortable with the L2 instance.

Jordan has gotten some feedback from Curve and dHedge on their preferences for which L1 synths should remain, in addition to Andre’s request to keep Forex synths; so, the list of exact synths to be deprecated is now complete and can be viewed in the SIP proposal. Voting for this SIP is also now in progress, and once approved will work in parallel with SIP-174, which will greatly simplify the deprecation of these synths.

There are also several SIPs sitting in ready for execution this week:

  • First, SIP-167, L2 bridged governance, just went through the audit and is done for the most part, but Justin is still getting some feedback and is hoping to roll it out next week with the Mirfak release.
  • Next, SIP-149, Deprecating Binary Options, is ready to be executed. We discussed this SIP last week, where Danijel suggested handling it manually by creating a contract that allows those who have longs or shorts to just withdraw some sUSD from it. Jordan will be working with Danijel to fund the wallet in the proposal and get this going.
  • Lastly, SIP-135, for Shorting on L2, is just about ready. Though still sitting in approved, Mark says this SIP is going through its last few tests and is scheduled to be looked at by the auditor next week.

In addition to the previously mentioned SIP-174, a few other proposals were also voted on and approved this week:

  • SIP-170 for Inflation Diversion for L2 Incentives and SCCP-133 for Increasing volume partner rewards were both approved with seven votes in favor from Jackson, Synthaman, Brian, Michael, Bojan, Spreek, and Danijel, and none against.
  • SCCP-134, which proposes Reducing the L2 Target C-Ratio, was also approved this week with five votes in favor from Synthaman, Brian, Bojan, Danijel, and Spreek, and none against.

There are also two SCCPs where voting is currently in progress: SCCP-136 to increase L2 inflationary rewards to 50,000, and Rafa’s new SCCP-135 to allow for continuous account merging of any balance of escrowed SNX.

And lastly, now that we are officially a month away from the end of the epoch, it’s time to start thinking about voting! In the coming weeks, SNXweave will be hosting a panel-style podcast for current Spartan Council members and one for select Spartan Council candidates. Qualification standards for this second panel are still being worked out, however both should prove to play critical roles in informed voting by bringing visibility to the stances and perspectives of Spartan Council candidates. So expect more information soon on this front!

SIP/SCCP status tracker:

SIP-173: Synth Upgrader Contract, Status: rejected

SIP-174: Redeem Deprecated Synths, Status: approved

SIP-158: Deprecate Inverse Synths, Status: approved, waiting for execution

SIP-166: Removing sCEX, iCEX and adding sCEFI, Status: approved, waiting for execution

SCCP-124: Rebalance and rename sCEX to sCEFI, Status: approved, waiting for execution

SIP-175: Protocol Maintenance Funding, Status: rejected, to be rewritten

SIP-155: Deprecating the sDAO, Status: vote in progress

SIP-80: Synthetic Futures, Status: feasibility

SIP-153: LINK Wrappr, Status: approved

SIP-120: TWAP Exchange Function, Status: vote in progress

SIP-169: Deprecate low volume L1 Synths, Status: feasibility, presentation coming soon

SIP-167: L2 bridged governance, Status: approved, execution imminent

SIP-149: Deprecating Binary Options, Status: approved, paused

SIP-135: L2 Shorting, Status: approved

SIP-170: Inflation Diversion for L2 Incentives, Status: approved

SCCP-133: Increase volume partner rewards to 10K SNX p/month, Status: approved

SCCP-134: Reduce L2 Target C-Ratio to 900%, Status: approved

SCCP-136: Increase L2 Inflationary Rewards to 50K, Status: vote in progress

SCCP-135: Open Account Merging Continuously, Status: vote in progress